As companies ramp up and settle into their return-to-office policies, demand for high-quality office space is intensifying. With space in trophy towers dwindling, tenants across Canada may soon need to find creative ways to secure space. For now, the market remains favourable to tenants, who are wise to act fast before it turns.
Older office buildings see positive absorption
The flight to quality has long shaped Canadian markets, but now it’s what defines the current recovery. Though that implies all eyes are on premium, newer office spaces, it doesn’t mean that older buildings can’t compete. As markets shift, there’s an opportunity for well-located buildings to fill in the gaps.
As absorption trends have shifted, the market has reached a critical inflection point. In Q4 2024, vintage buildings—particularly those built in the 1970s and 1980s—recorded over 1 million square feet of net absorption across Canada, reversing a multi-year trend of weak demand.
New office construction starts have fallen to historic lows, with nothing significant in the pipeline beyond 2026. Given the three- to five-year timeline for new office development – longer in cities than in the suburbs – that means no substantial new inventory coming online until at least 2030. And consequently, no more new space to be absorbed, causing tenants to look at other options available.
Office construction & share of new inventory
These conditions have been a long time coming. Key office-using industries have experienced enormous growth since the pandemic. Employers are increasingly focused on bringing an expanding workforce back into the office, which shows in upticks in transit usage and mobility. Buildings with proximity to transit options have a distinct advantage in capturing tenant demand.
Strategic opportunities abound for owners of older office assets
Companies are looking to offer spaces that encourage collaboration and increased productivity. Owners of more seasoned office buildings have a unique opportunity to capture tenant interest by modernizing their properties with targeted amenities that serve those purposes. There’s no one-size-fits-all approach; the right investment depends on the building.
Small building upgrades
Smaller buildings under ten floors should focus on high-impact, space-efficient upgrades. Concierge services and lobby enhancements elevate the atmosphere from the moment a tenant steps inside. An in-house barista is the kind of addition that goes a long way towards crafting a bespoke experience.
Beaver House in Edmonton employed these and other strategic enhancements. Avison Young helped to retrofit the five-story 1947 heritage building with bike storage and a modern and comfortable tenant lounge and games room with a large kitchen.
Mid-sized building additions
Mid-sized buildings of 10 to 25 floors are great for wellness-oriented additions like upgraded fitness centers, lounge spaces, or dedicated co-working environments. These appeal to tenants looking to foster a company culture that values well-being and offers a place that employees enjoy coming to every day.
Calgary House is a 14-story vintage tower built in 1966. A prime location close to popular dining and retail options and proximity to transit position the property to compete with trophy towers. The main floor features a lounge for tenants, as well as a conference center and a newly renovated tenant-only fitness facility on-site.
Larger building boosters
Larger buildings with 25 or more floors have the space to take big swings by dedicating full floors to amenities to compete with new trophy towers. Tenant-exclusive fitness centers bring cachet, a perk tenants can offer to employees.
Scotia Plaza in Toronto will be getting a 20,000-square-foot meeting and events space and tenant amenity area. The space was developed in response to tenants expressing a desire for space to host both internal and larger meetings. The 68th floor will have a 10,000-square-foot tenant exclusive event space, as well as another 10,000-square-foot space that can accommodate outside events like weddings. High-end hospitality features make a building more versatile, transforming it from just an office space into a destination.
Close to home: Avison Young’s Montreal office
One example of landlords investing in their building amenities is our own Montreal office relocation. A key factor in selecting our new space at 1801 McGill College Avenue was Redbourne’s recent investment in enhancing the property, including a renovated lobby, a tenant-exclusive gym with separate showers, and a shared conference centre. Most importantly, the addition of an outdoor terrace—a rare feature in the downtown core—was a standout element for us. These upgrades were truly instrumental in our decision, all with the well-being of our employees in mind.
A defining moment for tenants and landlords
For now, smaller leases continue to drive market activity. Absorption and vacancy trends indicate that older buildings are already benefiting from trophy tower scarcity. It will take some time, but the ultimate confirmation will come as rental rates for these assets begin to rise, as these older buildings continue to make improvements to their offerings to become more appealing and competitive on the marketplace, signaling a true shift in market dynamics.
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Article contributors
Thomas Forr
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- Director, Data, Analytics & Innovation, Canada
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- Consulting & Advisory
- Corporate Executive
- Market Intelligence
